Singapore-based ASEAN+3 Macroeconomic Research Office (AMRO) has projected that the United States (US) tariffs imposed on its trade partners in the region, including the 19-percent duty on the Philippines, will be felt by the end of 2025.

Such drag will serve as friction to gross domestic product (GDP) expansion, which is expected to edge down to 5.6 percent this year from the faster 5.7 percent growth last year. Even if this materializes, the weaker growth would still fall within the government’s downscaled target of 5.5 percent to 6.5 percent.

Based on the ASEAN+3 Regional Economic Outlook (AREO) October Update, AMRO has retained its July forecasts for 2025 and 2026, with growth seen slowing further to 5.5 percent. This would fall below the revised target by 50 basis points (bps).

Runchana Pongsaparn, head of the AMRO group and lead economist, stated that the reduced output growth expected this year and next could be due to influence of US President Donald Trump’s protectionist policies on the country’s exports.

“It’s partly because of weaker exports, just like in other countries in the region, where we expect that the impact of the US tariffs is going to kick in towards the end of the year and next year,” Pongsaparn said in a virtual press briefing on Thursday, Oct. 9.

However, Pongsaparn remains upbeat on other metrics of the country’s macroeconomic backdrop. “We still expect consumption to grow quite steadily, supported by a strong labor market, lower inflation, and still-robust remittances,” she said.

Pongsaparn added that “private investment, sentiment, and export performance are likely to moderate growth slightly due to external uncertainties related to the US tariffs.”

It was in July when Trump and President Ferdinand Marcos Jr. agreed on a 19-percent tariff on Philippine exports, modestly lower than the 20 percent the US had earlier threatened to impose on Philippine-made imports.

AMRO chief economist Dong He affirmed this forecast, noting that the Philippine economy was expanding “much faster” before the pandemic compared to the expected growth for this year and next year.

It can be recalled that before the Covid-19 pandemic hit the Philippines, growth ranged between six percent and seven percent. In particular, GDP expanded by 6.3 percent in 2015, 7.1 percent in 2016, 6.9 percent in 2017, 6.3 percent in 2018, and 6.1 percent in 2019.

“Investment should really be much higher to underpin productive capacity in the medium term,” He said, referencing AMRO’s recent consultation in the Philippines.

He also flagged “major shocks” caused by fluctuations in climate and risks associated with the country’s exports.

Given the country’s vulnerability to climate risks, He argued that “infrastructure really has to be strengthened. Some of these issues with flooding have to do with infrastructure not being able to deal with these shocks—and that can be strengthened much further.”

Meanwhile, the Philippines, being a service-driven economy with strong exports in business process outsourcing (BPO) and call centers, must invest in upgrading its workforce to stay competitive in the age of artificial intelligence (AI), said He.

This would require greater investments from both the government and the private sector to prepare the economy for future challenges.

Pongsaparn, meanwhile, said the degree of impact of the recent flood control corruption issues on the wider economy is still being assessed.

“If the event is short-lived and does not severely affect investment sentiment, then that could be contained and may not affect the growth forecast materially. So we still wait and see the overall impact,” Pongsaparn said.